UK Chancellor announces help for business rates payers, but big issues remain

Business rates, a tax on business property, are a major part of the UK’s tax system and are a particularly big deal for property-intensive retailers. In his Budget speech today, Philip Hammond, the UK’s Chancellor of the Exchequer, announced that he was bringing forward by two years a planned change in the way business rates are adjusted for inflation each year. Specifically, rates will be uprated using the CPI (Consumer Price Index) measure of inflation instead of the RPI (Retail Prices Index) from April 2018. Since CPI tends to be lower than RPI, this change will result in two years of slightly lower tax rises, and is expected to save businesses an estimated £2.3 billion in total.

The change is likely to be welcomed by businesses. But the business rate regime still poses a number of challenges to policy makers, including the size of the burden placed on productive investment and the imbalances created between physical and online retail business models. Earlier in the summer, Frontier’s bulletin, Taxing bricks – and clicks?, explored these issues, and the options for reform.

Frontier regularly advises businesses and government on taxation and other public policy issues.